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The DAO Experiment: Future Possibilities and New Questions

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The DAO Experiment: Future Possibilities and New Questions

The term Dao is best known as a Chinese spiritual and philosophical tradition that promotes harmony with all things. In this context it is defined as a “way”or “path” that engenders a life that flows naturally without being forced.

Then there is the acronym DAO, which is short for Decentralized Autonomous Organizations, a rapidly emerging word within the decentralized technologies space. Here we are referring to a universal shared network of individuals who engage online in an intentional path of work, cooperation, and wealth generation. And to add to the confusion, the term The DAO refers to a support platform for Ethereum-related projects, a dense cache of smart contracts written on the Ethereum blockchain. But more on The DAO later.

Vitalik Buterin, founder of Ethereum is generally credited with jump-starting the recent popularity in DAOs. According to his blog post of May 6, 2014, wherein he defines DAOs, DACs, DAs and more.

The ideal of a decentralized autonomous organization is easy to describe: it is an entity that lives on the internet and exists autonomously, but also heavily relies on hiring individuals to perform certain tasks that the automaton itself cannot do.

Buterin makes in interesting distiction further on, however, between DAOs and a subclass: DACs.

… a DAC pays dividends. That is, there is a concept of shares in a DAC which are purchaseable and tradeable in some fashion, and those shares potentially entitle their holders to continual receipts based on the DAC’s success.

Group identity for a DAO is achieved via consensus. And its credibility in large part ensues from voluntary endorsement and the power of network effects. It is for these and many other reasons that DAOs, by leveraging the Wisdom of Crowds theme popularized by James Surowiecki, are seen by many as the next wave of trailblazing innovation in the emerging collaborative economy. The number of potential DAO applications is pretty much limitless.

The potential of DAOs (aka decentralized autonomous organizations) to serve as an alternative to prevailing centrally-governed, hierarchical models that we’ve grown accustomed to holds great appeal.

“The DAO” — A variation on a theme

The DAO movement officially took a significant step forward on April 30th through the launch of the previously mentioned The DAO,  the Ethereum-based hub allowing individuals to acquire tokens which will allow them to vote on the funding and direction of future projects. The milestone fueled a rush to set up new ether accounts, resulting in the highest number of Ethereum transactions ever. In fact, The DAO is now the second largest holder of ether, the crypto-fuel driving the ethereum network, overtaking the Ethereum Foundation for that distinction.

At the time of this writing, five projects are currently in the process of submitting proposals to The DAO.hub for funding. Two have been publicly named: Slock.it which examines the intersection between the Internet of Things and blockchain, and the P2P electric vehicle firm Mobotiq. Optimism abounds in both of these camps.

Thomas Cocirta, founder of Mobotiq, told BTCMANAGER, “Yes, we are currently in the process of writing our proposal for The DAO. We’re great believers in decentralization and P2P and open source, hence the blockchain and DAOs. Our work is with electric vehicles and mobility. We came to the blockchain and DAO because we found them to be perfect tools for what we wanted to build: smart, clean, p2p mobility solutions. After talking to pioneers like Stephan Tual (Ethereum, Slock.it) and studying this new technology, we decided to go for it. We hope that our fleets will be deployed in urban areas and people will utilize them on pay-per-use basis, using The DAO blockchain. We are also building an R&D autonomous vehicle to prepare for the future when vehicles will not only be self-driving, but self-renting and self-organizing, ultimately becoming DAOs of their own.”

The evolution currently taking place in The DAO’s development and launch process could be described as “Schumpeterian” in its orientation as early innovators tinker with new combinations that promise to shake prevailing centralized models, fueling Schumpeter’s creative destruction.

The 20th century Austrian-born economist Joseph Schumpeter calls this trajectory the “gale of creative destruction,” the “process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.”

It reflects a tenuous ebb and flow among stakeholders as this highly complex form of organization continues to take shape. Ultimately the mainstream will decide whether The DAO and other DAOs are going to survive amid this complexity; common thinking suggests that the larger the community, the more likely for this movement to catch on.

The essence of a Decentralized Autonomous Organization (DAO) is its distributed nature. Here, this new form of organizational structure holds similarities to a digital company, albeit one without a jurisdictionally based legal entity or control on the part of its creators. With irrefutable computer code driving its functionality, it operates entirely through a community that drives future growth by investing in The DAO tokens using Ether, the fuel for the Ethereum network.

Token holders hold a stake in The DAO through projects that are accepted by the community through a voting process. Once accepted, smart contracts are used to codify these project agreements. And to ensure that project stakeholders (otherwise known as contractors) act in full integrity with The DAO, signatories from the community validate the proposals before adding them to the database of contractors permissioned to receive ether (ETH) via The DAO.

The ultimate value proposition of these decentralized organizations? In the case of The DAO, the democratization of investments at a reduced costs for investors and project stakeholders.  

Despite the enthusiastic response to The DAO, major questions remain. By all accounts, The DAO development process is a social experiment of immense proportions, akin to solving a highly complex Rubik’s Cube, replete with technical jargon and a spate of seemingly unanswerable riddles. It is inherently complex in its proposed inner workings making it a challenge to convey to those unfamiliar with its fundamental tenets.

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The DAO takes questions from the community

The inherent intricacies surrounding The DAO were recently in full display during a live, Google Hangouts online session entitled “The DAO Framework With Slock.it – Special Ethereum London Meetup.” In this 2-hour session, featuring Slock.it Founder and COO Stephan Tual as the primary moderator, attendees took advantage of the opportunity to pose a wide swath of questions in rapid fire succession.

As an emerging startup company heavily in the throes of examining the intersection between the blockchain and the Internet of Things, Slock.it has been feverishly developing, building and testing the component parts of its fully decentralized, 100 percent free and open-source DAO framwork. This initiative hasn’t been without its complications, as evidenced by the disparate, knotty and often repetitive questions posed at the recent online Meetup forum.

At one point, Tual was asked about the return-on-investment for stakeholders who have purchased DAO tokens with ether. Tual skillfully and optimistically navigated through the question while delivering a heavy dose of realism into the equation: “We just want to build an awesome product. And our intention is for this to be a long-term project. So it’s not realistic to expect a rapid return on investment. We are not promising any short-term return on investment or any return on investment for that matter because what we are pursuing is high risk and highly speculative.”

And then there was the question, “Does Slock.it have a tentative agreement with Airbnb?” (i.e. “what is stopping Airbnb from setting up their own DAO by copying the open source code? ) According to Tual, Slock.it doesn’t have an agreement with them nor have they been in touch with them. He did express certainty that technology was of interest to Airbnb because it could positively disrupt their business model.

“First there was an article in the media saying that they [Airbnb] had been exploring blockchain technology followed by another denying it. I think they are still exploring their options.”

In the balance, Tual made an effort in his remarks to emphasize the experimental nature of The DAO, which involves curating the right mix of synergies in the ecosystem. He talked about the importance of identifying the right project proposals, ideally with common themes that work well together. He seem to suggest that the governance protocol for The DAO was still in its infancy with both known and unknown issues to be hashed out.

Perhaps most telling though, were remarks by Tual about the confusing nature of what DAOs really are and how they are intended to operate. He alluded to the fact that “most people really don’t understand what we’re doing yet they don’t take the time to read the whitepaper or Wiki making the decision to get involved.” He even jokingly gave his assessment as to why The DAO concept or Slock.it has yet to garner a prominent news story in a major business publication. “This stuff is so complex and boring that journalists are not inclined to want to report on it”

DAOistic Learning Moments

Yet the early stages of the developmental path of The DAO offer some cautionary tales and learning moments along the way.

Similar to most tech startup innovations, the growth trajectory of the DAO concept is rife with complexity and uncertainty. Here, major bottlenecks can occur when public messaging and languaging approaches are not skillfully honed. The good news is that powerful learning moments acquired during these early stages can help to inform communication efforts involving current and future stakeholders.

Below are three basic takeaways that DAOs and other early trailblazers in the bitcoin/blockchain landscape should give thoughtful consideration to as they advance toward wider acceptance and adoption:

Simple Messaging: One of the big challenges that visionaries and company founders often face in articulating their message is that they and the majority of the people working for them are left brain, technically oriented. Thus the tendency for what is being said to be highly verbose and technical. Communication consultant Neal Browne of Neale Browne and Associates advises, “Whether on an online forum or in front of a television camera, sound bites rule. If you can’t say it, and say it well, in 15-seconds or less you’ll get knocked out of the game quickly and won’t get heard. Period.  In other words, if you don’t make it short, powerful, and pithy, you’ve likely lost your chance. Either you edit yourself and speak well, or someone else will edit you…and you might not like the result.”

Online Community Facilitation: Openness and transparency are hallmarks of the blockchain revolution. This is certainly evident on online communities like Slack and Reddit where spirited discussions can invite disparate, extreme views and at times heated exchanges. Akin to a frenetic online cocktail parties replete with a wide collection of spirited enthusiasts as well as detractors. Slock.it’s Tual mentioned this very point noting his company’s efforts at moderating and facilitating discussions on these forums are still evolving. Here is just one example of how he adroitly addressed an issue of confusion to many on Reddit /r/ethtrader, namely the distinction between TheDAO and DAOs (like Slock.it) in general.

Media Release Protocol: A common theme in the startup business world is that a rapid market launch can provide a competitive advantage. While speed can be critical to the success of any new, it also suggests a cautionary tale.

Says David Wachsman of Wachsman PR, whose clients in the blockchain space include Kraken, Overstock.com’s t0.com, and Purse, among others: “Like all young enterprises, startups in the blockchain space are anxious to broadcast new developments immediately. There is valid psychological reasoning: as social creatures, it’s human nature to desire instant feedback on brilliant ideas. In business, every day that a new product, feature or service goes unadvertised is considered another costly day without marginal revenue from a promising income stream.”

Wachsman counsels clients to employ some patience when releasing information to the public which often leads to a little pushback. But a thoughtful and strategic approach communicating complicated or potentially confusing ideas is necessary. Startups have a better chance of achieving their business goals with PR by ensuring a cogent narrative, clear and accurate content, carefully crafted messaging, and well-timed, targeted media exposure.

In the end, the future of DAOs and other ambitious efforts tethered to the blockchain will be predicated on collaborative decision-making, problem-solving and other aspects of participatory exchange. Remaining present to the prevailing challenges associated with building these synergies among a worldwide collective of individuals is the essence of the DAOist path.

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